SHANGHAI—China's real-estate sector showed strength in the first half of the year amid solid housing demand, despite government controls on the market and slowing economic growth.
While the buoyancy in the housing market could lead to tighter market curbs in the months ahead, analysts said that for now, growth levels were within tolerable levels.
Reuters
Workers welding a steel frame at a construction site in Hefei, Anhui province.
Total property investment in China in the first half of the year rose 20.3% compared with a year earlier to 3.68 trillion yuan ($599.3 billion), according to data released Monday by the National Bureau of Statistics. That is marginally slower than the 20.6% growth in the first five months of the year.
The statistics bureau doesn't give data for individual months.
Residential and commercial property sales totaled 3.34 trillion yuan in the January-June period, up 43.2% over a year earlier. Sales totaled 2.59 trillion yuan in the five months ended May, up 52.8%.
"Inventory levels in major cities are leveling off, so we're positive on construction starts and expect growth in this portion of the market to reach 5% to 7% this year," said Johnson Hu, an analyst at CIMB Securities.
Construction starts by area in the first half rose 3.8% from a year earlier to 959.01 million square meters. They were up 1% at 736.13 million square meters in the January-May period.
The increase comes despite a more than three-year government campaign to keep real-estate prices in check amid fears that higher housing costs could lead to social unrest. Efforts include limiting home purchases, squeezing credit to developers and tightening down-payment requirements.
Larger developers have been buying land in what are known as tier one and tier two cities—China's most affluent and developed cities—because of expectations of continued housing demand from migrants as the government pushes ahead with its plans to speed up urbanization. Developers typically purchase land and keep it in what they call a land bank for later use.
"Despite uncertainties in the macro environment and credit conditions, most of the developers we talked to last week still have aggressive plans for land banking" in the second half of this year, said Credit Suisse analyst Jinsong Du.
Analysts also said that the policy environment in the housing market is favorable, despite government efforts to keep housing prices from spiraling higher.
The market has also shrugged off a once-feared directive from China's State Council, or cabinet, ordering local governments to strictly implement a 20% tax on profits from second homes. So far, Beijing is the only city to have implemented the capital-gains tax.
"Implementation is still quite patchy … the upward pressure [on sales and prices] in the residential market will continue," said Frank Chen, executive director at CBRE Research, a real-estate consulting company. He said, however, that price caps by local governments should put a lid on gains in housing prices.
Many market players are betting that China's policy makers will be forced to accept limited price gains in the housing market especially as economic expansion slows because growth in the property market props up the economy.
But amid all the good news there are some areas of concern. If Beijing keeps up its curbs on overall credit in the banking system, that could have an impact on housing sales, CIMB's Mr. Hu said.
"Property developers we spoke to said that banks are taking longer to approve mortgages," Mr. Hu said, adding that it takes six to eight weeks to get approval, up from the four to six weeks early this year. "But it's not going to dry up like it did in 2011 when mortgages took three months or longer to approve."
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